Future of Retirement: Surprisingly Optimistic
According to Aon Hewitt, "automatic enrollment has been one of the biggest retirement trends in recent years, and will continue to be in the year ahead, albeit with an enhanced focus on outcomes."
Currently, 55% of plan sponsors enroll workers automatically in their employer-provided defined-contribution plan, up from 24% in 2006. More than a third (34%) of plans are likely to add this feature for new hires in 2012.
Nevertheless, Aon Hewitt found that of workers who are subject to automatic enrollment, 63% still aren't saving enough to get the full employer match. In response, nearly one-quarter of employers plan to make changes to their automatic feature in 2012, including an automatic contribution escalation feature and increasing the initial default rate.
Plan sponsors also see the need for improved investment advice, according to the survey.As employers have moved away from offering defined-benefit plans in favor of defined-contribution plans, workers are left with "an annuity gap," Aon Hewitt found. As a result, more plan sponsors are introducing retirement income solutions either outside, within or alongside the plan. Sixteen percent of employers offer an "in plan" income solution -- including either an insurance product, managed account with a drawdown feature or a managed payout fund -- while 9% offer an out-of-plan option. Looking ahead, 22% plan to adopt one of these solutions in 2012. Nearly one-quarter are likely to add an option for employees to elect an automatic payment option from the plan over an extended time. Nearly three-quarters of plans intend to provide online modeling tools to help with post-retirement spending strategies this year. "Once, workers could count on a steady income stream throughout their retirement years," says Pamela Hess, director of retirement research at Aon Hewitt. "Now, more people are relying exclusively on their DC plan for their retirement savings and that regular 'paycheck' has disappeared, leaving many employees struggling to effectively balance retirement expenses." -- Written by Joe Mont in Boston. >To contact the writer of this article, click here: Joe Mont.
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